New York is 2,000 pages closer to becoming the first fossil fuels-rich state in the U.S. to ban fracking indefinitely because of the climate-changing methane it could emit and the earthquakes, air pollution and water contamination it could cause.

Gov. Andrew Cuomo announced in December that fracking, short for the natural gas extraction process called hydraulic fracturing, would be banned in New York, where the energy-rich Marcellus shale holds up to 9 trillion cubic feet of natural gas. The state followed up this week with a 2,000-page final environmental report outlining why it would be better off without the environmental, climate and public health implications of the process.

No other energy-rich state has successfully banned fracking beyond a handful of local jurisdictions. In Maryland, where two counties in the western part of the state overlie the Marcellus shale, the legislature has passed a temporary ban on fracking, which expires in two years. The New York ban is an administrative action that could be reversed by a future governor.

Fracking, which has brought about the U.S. shale oil and gas boom along with advancements in drilling technology, has several climate implications. Perhaps most significantly, extracting and transporting natural gas emits large amounts of methane, which is about 35 times as potent as a greenhouse gas as carbon dioxide.

But natural gas produced using fracking is also leading to the displacement of carbon-heavy coal as the nation’s primary fuel for electric power generation. The Obama administration’s Climate Action Plan and the U.S. Environmental Protection Agency’s Clean Power Plan call for major reductions in greenhouse gas emissions from coal-fired power plants, the primary drivers of climate change.

“The most obvious climate change question is: Will abundant natural gas and cheap natural gas lead to the phaseout of coal-fired power plants or slow the adoption of renewable electricity, and that dynamic, more than anything else, will determine the greenhouse gas consequences,” Rob Jackson, professor of environmental and earth system science at Stanford University, said after the announcement of the ban. “The decision to leave the fossil fuel in the ground clearly affects cumulative emissions and long-term climate change.”

New York State’s answer to that question is this: Replacing coal with natural gas may reduce greenhouse gas emissions, but it may also suppress investment in solar and wind power and energy efficiency measures because those clean energy sources could become less cost-competitive with fossil fuels.

In the long term, New York’s policies are directed towards achieving substantial reductions in GHG emissions by reducing reliance on all fossil fuels, including natural gas,” the report says.

Abundant natural gas streaming from Upstate New York wells would also come with intolerable human health and environmental costs, including degraded air quality from increased amounts of vehicle exhaust and particulate matter in the air, and possible groundwater and surface water contamination from poor well construction and chemical spills, according to the report.

The state is also concerned about earthquake risks associated with fracking. Last month, the U.S. Geological Survey published a study showing that oil and gas development, specifically deep underground injection of wastewater from fracking operations, made Oklahoma more seismically active than California in 2014, posing a major risk to life and property.

The final environmental report on fracking doesn’t yet ban it in New York, however. State law requires the New York Department of Environmental Conservation to wait 10 days before issuing a legally-binding findings report, which is expected to implement the ban.

Oct 23 A sharp decline in oil prices over thepast four months has called into question the sustainability ofNorth American shale production. Global benchmark Brent crude has fallen about 25percent since June due to oversupply, weakening demand andindications that key oil producers, particularly Saudi Arabia,have limited appetite to intervene in prices. Bernstein Research said this week that about a third of U.S.shale production would be uneconomical if oil prices were tofall to $80 per barrel. Brent was trading at $86.40 and U.S. crude at $81.55at 1735 GMT on Thursday. Below are several analysts' estimates of the breakeven oilprice for various shale fields in North America.

KLR GROUP (Oct. 22) "The U.S. E&P industry needs (more than) $90 NYMEX, about$100 Brent, oil prices to maintain the current oil rig count of1,500-1,600 rigs, which is intrinsic to our U.S. oil productionoutlook. A comparable NYMEX oil price is needed to maintain theprojected pace of Canadian oil sands development."

BERNSTEIN RESEARCH (Oct. 20) "We estimate that about a third of U.S. shale oil productionis uneconomic at $80 per barrel WTI. We disagree with otherestimates, including those cited by the IEA, which suggest thevast majority of shale oil production is robust at such prices.Our expectation is that (the) oil price will revert back to alevel where a much smaller portion of production is uneconomic."

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ROBERT W. BAIRD EQUITY RESEARCH (Oct. 14) "We estimate $73 as the weighted average breakeven point forU.S. supply."

MORGAN STANLEY (Oct. 14) "U.S. oil shale is moving down the cost curve and adding tothe global oil production mix as operators continue to improvedrilling and fracturing performance - essentially getting morefrom shale wells for less capex." "U.S. shale is now no longer the marginal barrel, with cashbreakevens in some major U.S. shale plays having dropped by upto $30 per barrel since 2012."

STIFEL, NICOLAUS & CO INC (Oct. 13) "The weaker portions of several U.S. shale plays, or newerareas that are in the delineation phase and have not benefitedfrom development drilling, require oil prices above $80 perbarrel in order to generate a pretax internal rate of return of20 percent, which is a reasonable threshold for most companies."

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WELLS FARGO SECURITIES (Oct. 13) "If the crude oil market believes a price-driven marketshare war is under way and 2015 demand growth will bemeaningfully lower than prior expectations, then our updatedview is that U.S. onshore 2015 E&P budgets would need to betrimmed so as to moderate production growth relative to lowerdemand expectations. "In such an environment we estimate that WTI prices of$85-90 per barrel versus our current estimate of $96 per barrelwould be required."

LONDON – Now that oil prices have settled into a long-term range of $30-50 per barrel (as described here a year ago), energy users everywhere are enjoying an annual income boost worth more than $2 trillion. The net result will almost certainly accelerate global growth, because the beneficiaries of this enormous income redistribution are mostly lower- and middle-income households that spend all they earn.

Of course, there will be some big losers – mainly governments in oil-producing countries, which will run down reserves and borrow in financial markets for as long as possible, rather than cut public spending. That, after all, is politicians’ preferred approach, especially when they are fighting wars, defying geopolitical pressures, or confronting popular revolts.

But not all producers will lose equally. One group really is cutting back sharply: Western oil companies, which have announced investment reductions worth about $200 billion this year. That has contributed to the weakness of stock markets worldwide; yet, paradoxically, oil companies’ shareholders could end up benefiting handsomely from the new era of cheap oil.

Just one condition must be met. The managements of leading energy companies must face economic reality and abandon their wasteful obsession with finding new oil. The 75 biggest oil companies are still investing more than $650 billion annually to find and extract fossil fuels in ever more challenging environments. This has been one of the greatest misallocations of capital in history – economically feasible only because of artificial monopoly prices.

But the monopoly has fallen on hard times. Assuming that a combination of shale development, environmental pressure, and advances in clean energy keep the OPEC cartel paralyzed, oil will now trade like any other commodity in a normal competitive market, as it did from 1986 to 2005. As investors appreciate this new reality, they will focus on a basic principle of economics: “marginal cost pricing.”

In a normal competitive market, prices will be set by the cost of producing an extra barrel from the cheapest oilfields with spare capacity. This means that all the reserves in Saudi Arabia, Iran, Iraq, Russia, and Central Asia would have to be fully developed and exhausted before anyone even bothered exploring under the Arctic ice cap or deep in the Gulf of Mexico or hundreds of miles off the Brazilian coast.

Of course, the real world is never as simple as an economics textbook. Geopolitical tensions, transport costs, and infrastructure bottlenecks mean that oil-consuming countries are willing to pay a premium for energy security, including the accumulation of strategic supplies on their own territory.

Nonetheless, with OPEC on the ropes, the broad principle applies: ExxonMobil, Shell, and BP can no longer hope to compete with Saudi, Iranian, or Russian companies, which now have exclusive access to reserves that can be extracted with nothing more sophisticated than nineteenth-century “nodding donkeys.” Iran, for example, claims to produce oil for only $1 a barrel. Its readily accessible reserves – second only in the Middle East to Saudi Arabia’s –will be rapidly developed once international economic sanctions are lifted.

For Western oil companies,the rational strategy will be to stop oil exploration and seek profits by providing equipment, geological knowhow, and new technologies such as hydraulic fracturing (“fracking”) to oil-producing countries. But their ultimate goal should be to sell their existing oil reserves as quickly as possible and distribute the resulting tsunami of cash to their shareholders until all of their low-cost oilfields run dry.

That is precisely the strategy of self-liquidation that tobacco companies used, to the benefit of their shareholders. If oil managements refuse to put themselves out of business in the same way, activist shareholders or corporate raiders could do it for them. If a consortium of private-equity investors raised the $118 billion needed to buy BP at its current share price, it could immediately start to liquidate 10.5 billion barrels of proven reserves worth over $360 billion, even at today’s “depressed” price of $36 a barrel.

There are two reasons why this has not happened – yet. Oil company managements still believe, with quasi-religious fervor, in perpetually rising demand and prices. So they prefer to waste money seeking new reserves instead of maximizing shareholders’ cash payouts. And they contemptuously dismiss the only other plausible strategy: an investment shift from oil exploration to new energy technologies that will eventually replace fossil fuels.

Redirecting just half the $50 billion that oil companies are likely to spend this year on exploring for new reserves would more than double the $10 billion for clean-energy research announced this month by 20 governments at the Paris climate-change conference. The financial returns from such investment would almost certainly be far higher than from oil exploration. Yet, as one BP director replied when I asked why his company continued to risk deep-water drilling, instead of investing in alternative energy: “We are a drilling business, and that is our expertise. Why should we spend our time and money competing in new technology with General Electric or Toshiba?”

As long as OPEC’s output restrictions and expansion of cheap Middle Eastern oilfields sheltered Western oil companies from marginal-cost pricing, such complacency was understandable. But the Saudis and other OPEC governments now seem to recognize that output restrictions merely cede market share to American frackers and other higher-cost producers, while environmental pressures and advances in clean energy transform much of their oil into a worthless “stranded asset” that can never be used or sold.

Mark Carney, Governor of the Bank of England, has warned that the stranded-asset problem could threaten global financial stability if the “carbon budgets” implied by global and regional climate deals render worthless fossil-fuel reserves that oil companies’ balance sheets currently value at trillions of dollars. This environmental pressure is now interacting with technological progress, reducing prices for solar energy to near-parity with fossil fuels.

As technology continues to improve and environmental restrictions tighten, it seems inevitable that much of the world’s proven oil reserves will be left where they are, like most of the world’s coal. Sheikh Zaki Yamani, the longtime Saudi oil minister, knew this back in the 1980s. “The Stone Age did not end,” he warned his compatriots, “because the cavemen ran out of stone.”

OPEC seems finally to have absorbed this message and realized that the Oil Age is ending. Western oil companies need to wake up to the same reality, stop exploring, and either innovate or liquidate.

When a 4.6 magnitude earthquake struck British Columbia on 17 August, 2015, many were suspicious the event had something to do with a nearby fracking site operated by Progress Energy Canada. Now, the BC Oil and Gas Commission has released a report definitively linking the quake to the underground injection of hydraulic fracturing fluids, making it the strongest known earthquake caused by fracking.

This comes as no surprise considering on the ground reports of the event. The epicenter of the quake was only a scant 3km from a fracking site, where workers were forced to suspend operations as their trucks shook and power lines swayed. While fracking has been linked to seismic activity before, most of the quakes are relatively small — usually ranging between 3-4 on the Richter scale.

Fracking-induced quakes so far have been fairly minor, so energy regulators have been able to write them off as harmless and unlikely to do major damage to nearby buildings or infrastructure. However, geologist John Cassidy worried in an interview with the Globe and Mail that “more and bigger” fracking-induced earthquakes could be coming. He points out that in 2002-2003, northeast BC only experienced 24 earthquakes. After fracking began in the region, from 2010-2011, that number jumped to 189.

This mirrors research in the US, which indicates earthquakes in Oklahoma have jumped from about two 3.0 earthquakes a year in 2009 to roughly two per day now. The debate about the public safety impact of the quakes aside, there’s at least one other good reason to oppose fracking: recent studies show underground fractures can also release methane, a powerful greenhouse gas, into the atmosphere.

While these numbers are troubling, there’s still reason to be hopeful: activists have already managed to ban fracking in countries and states throughout the world. In Canada, the provinces of Quebec, Newfoundland and Labrador, New Brunswick, and Nova Scotia have all passed fracking moratoriums while experts study the environmental impact of the practice.

In the US, it’s banned completely in New York state and Vermont, as well as in individual cities and counties throughout the nation. Bulgaria, France, Germany, and Ireland have also outlawed the practice, and other countries like Tasmania have issued temporary moratoriums, which will hopefully become permanent as more studies reveal the dangers.